Business
Mandela’s economic legacy threatened by S. Africa’s inequality
JOHANNESBURG – Nelson Mandela emerged from 27 years in apartheid jails in 1990 pledging to seize South Africa’s mines and banks. Four years later, his government slashed spending and courted foreign investors, paving the way for the longest period of growth in the country’s history.
The former president and Nobel Laureate, who died Thursday at the age of 95, was instrumental in getting the African National Congress, which led the fight against apartheid and has ruled ever since, to embrace an open economy.
“Only a Mandela could have realigned the ANC’s economic policy from the mindset of the 1950s, with the development state, with socialism, with nationalization, to the world of the 1990s and beyond,” Robert Schrire, a politics professor at the University of Cape Town, said in an interview. “He recognized that for the poor to prosper, the rich had to feel they had a future in the country.”
Yet Mandela’s legacy of economic stability is beginning to come under attack as the country fails to slash unemployment and reduce inequality. The jobless rate remains 24.7 per cent, while average earnings for black households are a sixth of their white counterparts. The ANC’s youth wing last year waged a campaign for the nationalisation of banks and mines, the very policies ditched by Mandela in 1994, and poor communities have staged a series of protests against a lack of housing and basic services.
The rand has plunged 19 per cent against the dollar this year, the worst performer of 16 major currencies tracked by Bloomberg, and was trading at 10.4751 in Johannesburg Friday. “We still have racial unemployment, racial poverty and racial inequality,” said Sidumo Dlamini, president of the 2.2-million-member Congress of South African Trade Unions, the country’s largest labour grouping and a member of the ruling alliance. “Our country is still in white hands.” Mandela’s embrace of spending rigour and foreign capital allowed the economy to expand for 15 years, until the third quarter of 2008, when the global financial crisis pushed it into recession. That growth and rising tax receipts enabled the post-apartheid government to extend welfare grants to about 16 million people and give more than 85 per cent of households access to electricity, up from 45 per cent in 1996.
Instead of nationalizing companies, Mandela coaxed foreign investors into the country. His ideological shift laid the groundwork for Lakshmi Mittal’s LNM Group to buy Africa’s biggest steelmaker in 2004 and London-based Barclays Plc (BARC) to take control of South Africa’s largest consumer bank in 2005. In 2011, Fayetteville, Arkansas-based Wal-Mart Stores Inc. bought a majority stake in the nation’s biggest general-goods wholesaler.
Restoring confidence in South Africa’s economy in 1994 was a significant achievement. Apartheid had turned South Africa into a pariah state, subjected to international sanctions and boycotts. The economy was hemorrhaging foreign capital, had only enough reserves to cover 10 days of imports and was running a budget deficit of 9.1 per cent of gross domestic product.
Mandela asked Chris Liebenberg, who had just retired as chief executive officer of what is now Nedbank Group Ltd., the country’s fourth-largest bank, to become finance minister. He accepted the job on condition that South Africa would have a market-related economy and exercise fiscal discipline.
“Those were tough times,” Liebenberg said in an interview. “We were heading for bankruptcy. Mandela was very mindful that the ANC having not been in government would not be as astute in managing the economy as it should be. He came to me because I was a banker with lots of international contacts and experience.” In his first budget, Liebenberg raised taxes, equalized the tax system for all racial groups and slashed the defense budget. Those measures helped the government to raise $750 million in 1994 in its first post-apartheid international bond sale, 50 per cent more than originally planned. By 1999, the Finance Ministry had reduced the budget deficit to 2.3 per cent of GDP.
Mandela also persuaded Chris Stals, the central bank governor, to postpone his retirement by five years to help manage the country’s transition.
“We made steady progress from day one on for those first five years,” Stals said in an interview. “Our main task was to bring us back into the world economy. Mr. Mandela certainly made a major contribution to that. The trust people had in him and his policies certainly enabled us to lay a very good foundation.”
Mandela was sentenced to life imprisonment after being convicted of treason in June 1964, serving much of his sentence on Robben Island near Cape Town. His economic thinking was framed in terms of the ANC’s 1955 Freedom Charter, which called for the country’s mineral wealth and banks to be transferred to the ownership of the people.
“The question of nationalization of mines is a fundamental policy of the ANC,” Mandela said shortly after his release. “I believe the ANC is quite correct in this attitude and we should support it.”
A year later, he assured foreign companies their investments were safe following talks with then-Chinese Premier Li Peng, who told him nationalization wasn’t viable and that China was considering selling state companies.
“The world had changed while Mandela was in jail,” said Iraj Abedian, an economist who helped craft the Mandela’s administration’s 1996 hallmark economic policy, which won praise from international investors. “His engagement with the role players in the political, economic and financial world brought that reality home.”
Mandela helped set the broad parameters of economic policy, while leaving formulation and execution to his subordinates, according to Liebenberg, who now helps manage charities established by the former president. “Until Mandela set his stamp on a policy I think it would not have been possible to drive it through the ANC,” Liebenberg said. “It certainly would not have been possible to drive it through government.”
Abedian, now CEO of Pan-African Capital Holdings, a Johannesburg-based advisory service, was struck by the attention to detail that Mandela, a trained lawyer, gave to policy making.
“He would go through every document word by word, line by line,” Abedian said. “It was a question of understanding the rationale for every step, weighing it up, questioning it in detail, far more than people would believe.” Stals recounts how after Trevor Manuel was appointed finance minister in 1996 and the rand tumbled 8.8 per cent in the space of a month, Mandela would phone him two or three times a day for market updates.
“He showed a great interest in what we did and he was always quite well-informed,” said Stals. “He liked to discuss the monetary policy issues. He never really interfered, he never really gave instructions.”
Still, the stability that Mandela engineered in those early years after apartheid never made South Africa an economic dynamo. Economic growth has averaged 3.5 per cent since 2004, compared with 10.5 per cent in China and 7.7 per cent in India.
Moreover, the Gini coefficient, a measure of income inequality, has risen to 0.63 in 2009 from 0.59 in 1993, making South Africa one of the world’s most unequal societies.
Poverty remains most prevalent among black South Africans, who make up 79 per cent of the population of 53 million.
Mandela never tackled labor laws that companies say stifle investment, or turned around an education system that has left South Africa with labor shortages for skilled jobs.
A wave of violent labor unrest that swept the country in 2012 has continued this year, with workers in the mining, agriculture and transportation industries going on strike for higher wages. The unrest peaked on Aug. 16, when police killed 34 protesters at a Lonmin Plc (LMI) platinum mine.
Labor unions and the South African Communist Party blame the 1996 economic framework, known as Growth, Employment and Redistribution, for entrenching apartheid-era inequity. The policy, which was spearheaded by Manuel and described by Mandela as “non-negotiable,” sought to trim state borrowing, contain inflation and gradually relax exchange controls.
“Established capital benefited from stabilization and liberalization measures,” while the interests of the poor and working class were largely overlooked, said Blade Nzimande, the SACP’s general secretary. The ANC’s Youth League revived calls for nationalisation, saying drastic steps were needed to distribute the country’s wealth more equitably. The league has toned down its demands since its leader Julius Malema was expelled from the ANC last year. Mandela did the best he could for the country under the circumstances, Abedian said.
“Very few people appreciated what unstable macroeconomic conditions apartheid had left behind,” he said. “In that type of environment what was critical was to have a credible, not necessarily an instant, solution. Mandela realised what steps had to be taken to normalize and stabilize the economy.”
– VANGUARD
The need for stronger regional collaboration, government-private sector synergy, and innovative market solutions to unlock Africa’s economic potential has been brought to the fore.
Group CEO of the Nigerian Exchange Group Plc (NGX Group), Temi Popoola, shed light on the transformative potential of Africa’s capital markets at the launch of the Ethiopian Securities Exchange (ESX).
The NGX Group’s strategic investment in ESX underscores its leadership in advancing Africa’s capital market infrastructure. “The launch of ESX represents a pivotal moment for Ethiopia and the broader African financial landscape,” Popoola stated. “ESX will serve as a crucial mechanism for capital formation and market liquidity, driving sustainable economic growth.”
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Expounding on NGX Group’s investment rationale, Popoola highlighted Ethiopia’s immense market potential and the shared vision of fostering economic growth through innovation. “Our partnership transcends traditional investment parameters,” he explained. “It is about ensuring that ESX evolves into a key player in Africa’s financial ecosystem, enabling cross-border investments and setting benchmarks for market development.”
Popoola also drew parallels with global success stories like India, which has leveraged its capital markets to achieve significant economic transformation. He emphasized the importance of responsible market opening to attract local and continental capital. “By following this path, Ethiopia can become a financial hub in Africa,” he remarked.
Prime Minister Abiy Ahmed lauded the launch of ESX as a transformative milestone in the country’s journey toward economic modernization. “Today, we have officially rung the bell to launch the Ethiopian Securities Exchange, our nation’s first stock exchange,” the Prime Minister announced on X. “This is a call to global investors: Ethiopia offers immense potential, a fast-growing economy, and a clear trajectory toward shared prosperity.”
CEO of the Ethiopian Securities Exchange, Tilahun Esmael Kassahun, expressed confidence in the partnership with NGX Group. “We are pleased to welcome NGX Group as a strategic partner, building upon the existing support we continue to receive from them,” he said. Kassahun also emphasized the value of NGX Group’s expertise in shaping ESX’s growth and success.
Drawing from NGX Group’s six decades of experience, Popoola shared insights on diversifying financial instruments and expanding access to investment opportunities. “With the right mix of innovation, policy support, and regional collaboration, Ethiopia’s capital market can play a transformative role in driving economic development and establish itself as a leader in Africa’s financial ecosystem,” he concluded.
With the ESX poised to redefine Ethiopia’s financial landscape, NGX Group’s involvement highlights the critical role of partnerships and shared expertise in advancing Africa’s economic narrative.
The Office of the Auditor-General of the Federation has uncovered financial irregularities amounting to ₦514 billion in the 2021 operations of the Nigerian National Petroleum Company Limited (NNPC Ltd).
The revelations were contained in a comprehensive audit report highlighting non-compliance and internal control weaknesses within Ministries, Departments, and Agencies (MDAs) during the 2021 financial year.
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Breakdown of Infractions
The audit detailed four major financial discrepancies within NNPCL:
“Irregular Deductions: A total of ₦343.64 billion was deducted from domestic crude oil sales at source without proper documentation.
“Sinking Fund Deposits: ₦83.66 billion, categorized as miscellaneous income, was retained in a sinking fund account.
“Unauthorised Refinery Deductions: ₦82.95 billion was deducted from federation revenue purportedly for refinery rehabilitation.
“Unsubstantiated Payments: ₦3.75 billion was flagged for transactions related to petrol sales that lacked proper verification.
The Auditor-General’s report stated that these financial activities violated the 1999 Constitution and the Financial Regulations Act of 2009, underscoring significant lapses in compliance with statutory guidelines.
According to the report, NNPCL generated ₦484.73 billion from domestic crude oil sales in March and May 2021.
However, ₦343.64 billion was deducted for various purposes, including “Value Shortfall,” “Strategic Stock Holding Cost,” and “Pipeline Maintenance.”
The deductions were made unilaterally by NNPCL without adequate documentation or justification.
Additionally, the report flagged ₦50 billion of the net payable amount for May 2021 as unaccounted for, creating a significant gap in the federation’s revenue.
“Audit observed from the review of NNPC SAP payment record for March and May 2021 payments that the sum of ₦484.73bn was the gross amount generated for the sale of domestic crude for the months of March and May 2021.
“The sum of ₦343.64bn from the gross amount was unilaterally deducted from the gross domestic crude sales as NNPC Value shortfall, Strategic Stock Holding Cost, Crude Oil and Products Pipeline Losses, as well as the pipelines maintenance and management costs.
“The details of each of the cost components deducted were not provided for audit review. Hence, the reasons for the deductions could not be justified by the management.”
On the unremitted ₦50 billion from May 2021, the report noted: “In the month of May, the net payable that could have been remitted ought to have been ₦127.075bn, but only the sum of ₦77.075bn was remitted, leaving an unremitted balance of N50bn to the Federation Account, which has remained unaccounted for.”
The report attributed these anomalies to weaknesses in NNPCL’s internal control systems, warning of the risks they pose to public funds.
It read, “The above anomalies could be attributed to weaknesses in the internal control system at NNPC, now NNPC Ltd. This is a potential loss of Federation revenue, diversion of public funds, or misapplication or misappropriation of funds.”
The success of the maiden edition of the Lagos Shopping Festival (LSF), Africa’s first 72-hour non-stop commerce and entertainment event has been credited to the Governor of Lagos State, Babajide Sanwo-Olu.
This is the view of Managing Director/Chief Strategist of Chain Reactions Africa Ltd, Israel Jaiye Opayemi, one of the main organisers of the event.
According to Opayemi, though Chain Reactions Africa conceptualised the event, the festival could be rightly described as the Governor’s baby and owes its success to his leadership. “Firstly, the Lagos Shopping Festival could not have come to fruition if the Governor did not buy into our audacious plan when we first presented the idea to him during the Covid-19 pandemic in 2020. Secondly, it was the Governor’s exemplary leadership of the project as its Chief Marketing Officer which attracted the buy-in of key sponsors like Zenith Bank, Tolaram Group, First Bank Plc, and Guinness Nigeria Plc,” Opayemi revealed.
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While the duo of Zenith Bank and First Bank provided their bank on wheel platforms for buyers at the Lagos Shopping Festival, they also supported the Vendors with special Point of Sale Machines with which to process payments from buyers. The banks were also seen marketing their diverse banking products to guests within the shopping arena.
For Tolaram, it was a time to support the citizens and give back to society. Guests at the Lagos Shopping Festival were freely given some of the products of the group such as PowerOil, Indomie and Kellogg’s packaged into goodie bags and given out to prospective buyers at the shopping arena. The Children’s Arena was however activated by Indomie with the children entertained by Santa Claus within a well-equipped arena manned by the Indomie Brands team and the Lagos State Safety Marshalls. The children were daily treated to free Indomie meals daily and given various gifts to go home with.
On its part, Guinness Nigeria came through as the real life of the Nigerian party by organizing product sampling activation for the teeming guests at the festival using brands such as Singleton, Johnnie Walker, Ciroc, Don Royale and Captain Morgan to deliver pleasant experiences to guests aside from Guinness and Malta Guinness.
While unveiling the identity of the festival last month, Governor Babajide Sanwo-Olu had thanked the management of Zenith Bank Plc, Tolaram Africa Group, Guinness Nigeria Plc and First Bank of Nigeria for supporting the idea of a Lagos Shopping Festival, describing it as a value addition on the state’s tourism calendar and the overall efforts to grow the State’s GDP. The Governor further said, “I must specially acknowledge your pioneering sponsorship role. It is easy for a corporate sponsor to jump on the sponsorship band wagon of an already established festival and fund it. But you are supporting the maiden edition of this Lagos Shopping Festival with us. The competition is watching you now. Do not build this brand with us and yield the space for the competition to take over. I do hope you would all commit long term to this brilliant initiative.”
On his part, Girish Sharma, CEO Guinness Nigeria Plc, expressed enthusiasm for the initiative. “Lagos is the commercial heartbeat of Nigeria and Africa’s entertainment capital, and the Lagos Shopping Festival captures its essence. We see opportunities in this initiative because it is a creative fusion of commerce and entertainment. This partnership reflects our dedication to fostering economic opportunities and support the nation’s vibrant entertainment industry.”
A first-of-its-kind, the festival was a convergence of commerce and entertainment, bringing together buyers and sellers in the MSME ecosystem, and hordes of fun-seekers who were entertained with thrilling performances by A-list entertainers, including Adekunle Gold, Wande Coal, Teni, Young Jonn, BNXN, Ayo Maff, SB Live and EmmaOMG. The list also included some of Nigeria’s most sought after DJs such as DJ Neptune, DJ YK Mule, DJ Baddo while Gbenga Adeyinka the 1st and Larry J dished out rib-cracking comedy performances.
Held from 23rd to 25th Day of December 2024, at the iconic Mobolaji Johnson Arena, Onikan Stadium, Lagos, the Lagos Shopping Festival saw thousands of fans throng the main venue and select Lagos malls during the three-day period to bag the latest bargains from local and top global brands.
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